> If rich people spent more on luxuries, then the free market would naturally move resources away from creating necessities. This results in a shortage of necessities, resulting in higher prices. There's no increase in productivity caused by just shuffling jobs around, so the economy would be relatively stagnant

I agree. And further, the whole concept of "trickle down economics" always seemed like a propaganda scam to me -- I mean, how much _do_ the exceptionally wealthy even spend when going about their daily lives? And how much of that just ends up going to other super wealthy people anyway (private jets, yachts, fashion, etc)?

It isn't like they are buying millions of dollars worth of locally sourced items in their communities every day of the year.

> how much _do_ the exceptionally wealthy even spend when going about their daily lives?

They invest in companies. Take a look at the annual report for any public corporation. The category of "Expenses" is what gets spent on plant, equipment, salaries, interest, etc.

Roughly speaking, "Profit" is Revenue minus Expenses. Profit accrues to the investors. If the Profit turns out to be less than zero, that loss is attached to the investors.

> It isn't like they are buying millions of dollars worth of locally sourced items in their communities every day of the year.

The companies they invest in do.

>>> If the Profit turns out to be less than zero, that loss is attached to the investors.

Within limits. "Limitation of liability" circumscribes the investors' exposure to loss. The loss may also be attached to creditors, workers, and the general public.

You could replace one rich guy with a larger number of average Joe shareholders and still obtain the same results (or better, since average Joes usually tend not to be ego-tripping activist investors).

You spend less, proportionally, of your income the richer you are. Economic activity scales inversely with wealth.

Poor people spend close to 100% of their income on consumption, middle class people a little less, and up into the billionaires we're looking at less than 1%.

They "move money" in other ways, but I think the key here is that those other ways are just necessarily less economically stimulating.

What tax cuts for the rich were there in the 1970s? The tax cuts came in the 80's. There were also Nixon's price controls, which Carter continued, which were another disaster.

Inflation results from deficit spending.

Inflation results from more dollars chasing fewer goods.

That can come from deficit spending, or that can come from tax cuts freeing cash for people to spend.

> or that can come from tax cuts freeing cash for people to spend

Tax cuts do free cash to be spent that otherwise would be spent by the government. As it gets spent either way, it is not inflationary.

Inflation is the result of an increase in the supply of money relative to the value of goods and services in the economy.

Oh so the massive increases in the cost of food had nothing to do with the energy price spike post Ukraine invasion in Europe?

Interesting.

You can have price increases without inflation.

For example, let's say the only things you spend money on are eggs and gas. One day, the price of eggs goes up. You buy eggs, now you have less money to spend on gas. The demand for gas goes down, and so does its price.

I.e. a rise in the price of eggs does not result in an increase in your income to cover it.

But with money creation, there is more money chasing the same goods, so your income goes up along with the prices.

It's the Law of Supply and Demand in action.

But... When the cost of gas goes up, so does the cost of almost everything else because the trucks and trains and planes that deliver everything all use gas of some kind.

Supply and Demand still applies. If you have less money, demand drops, and so do prices.

Not for food or energy. Those are pretty necessary and it's hard for people to consume less.

You are making the assumption the government will spend the extra revenue.

That depends on their fiscal behavior and obligations.

> You are making the assumption the government will spend the extra revenue.

Yes, I am. They always do. Federal, state and local.